The extraordinary growth in solar energy has been stopped in its tracks as a result of the global pandemic. Many new projects that would have made 2020 the largest growth year for the sector to date have been put on hold for the foreseeable future. Luckily, the stalled growth of the solar sector is just that – projects have simply been put on hold. As the world transitions to a new post-pandemic society, growth in solar power generation will resume its upward trajectory. While two decades of growth in the solar energy sector has been stunted by the coronavirus pandemic, the outlook for the future remains positive.
In current times the effects of global shutdowns due to the coronavirus pandemic are far reaching and unrelenting. Although the renewable energy sector has seen extraordinary expansion year after year for the past twenty years, growth is looking to level off in 2020 due to COVID-19. That does not mean it will be flat for the foreseeable future. Luckily, the outlook remains positive and it appears progress in the solar sector has merely been put on pause causing a small delay to anticipated growth. According to the International Energy Agency, solar power was the second-fastest growing renewable source after wind in 2019 and will remain a major driver as the world continues to transition away from fossil fuels to renewable energy sources . Much like the oil and gas industry and many other sectors of the economy, solar energy development was stunted by the coronavirus resulting in operating changes for the business model to remain viable. While two decades of growth in the solar energy sector has been stalled by the coronavirus pandemic, the outlook for the future still remains positive.
Types of Solar Panels
Before beginning to investigate solar’s altered growth trajectories as a result of the global pandemic, an overview of the sector must first be covered. Solar panels utilize semiconducting materials to harness energy from sunlight and convert it to electricity that can be stored. The three major types solar cells used to capture light are monocrystalline, polycrystalline, and thin-film. Monocrystalline and polycrystalline panels are both made from wafers of silicon framed together in rectangular housings covered with a glass sheet . The composition of silicon varies between the two because monocrystalline is cut from a single crystal of silicon while polycrystalline is created by melting, then molding fragments of silicon crystals . Thin-film solar panels are most commonly made from cadmium telluride (CdTe), amorphous silicon (a-Si), or Copper Indium Gallium Selenide (CIGS) placed between two transparent, conducting layers of material with electrodes to capture electricity . The majority of residential and commercial solar panels are made from either monocrystalline or polycrystalline materials for several reasons. Monocrystalline are the most efficient and long-lasting solar cells with a current maximum efficiency in 2020 of 22.6%, but they are also the most expensive because during the manufacturing process they are cut from a single crystal of silicon . Polycrystalline solar panels generally have an efficiency of 14% to 16% and as a result, require more surface area for the same energy generation, but they are cheaper to manufacture . Thin solar panels are much less expensive to produce, can be flexible, and can handle higher temperatures, but require a lot of space to be efficient and degrade faster than the other two types .
There is also the distinction between commercial or industrial solar projects and a residential installation. The commercial and industrial (C&I) solar projects tend to be much larger with additional permitting, design work, area footprint, and overall cost. While the panels are larger and cost more because they use 96 cells per panel instead of the 72 cell residential standard, they are more efficient and generate a lower cost per watt . The size and scope for a residential installation is much smaller, so it can generally be designed and built for less cost in a shorter time frame. Residential panels can also be leased from the utility company or owned outright by the homeowner. The major difference between these two options is whether the tax incentives go to the homeowner or the utility provider .
Solar Growth Pre-Pandemic
Prior to the pandemic that shut down global economies for months on end, the solar power generation sector was experiencing spectacular growth. Since 2016, solar power generation has represented approximately 30% of new U.S. electric generation capacity, with an estimated 34% growth experienced in 2019 . In fact, by the end of 2019, global photovoltaic installations reached 627 Giga-Watt direct current (GWdc), an annual increase of 115 GWdc from 2018 . What is even more impressive is the EIA estimates the share of electricity generation from renewable sources will double within the next 30 years. While solar is still behind wind and hydroelectric in terms of electricity generation market share, it is the sector experiencing the biggest surge in implementation and will dominate the market share by mid-century. Furthermore, by 2050 the EIA expects renewables to account for more electricity generation than natural gas, and this growth will be fueled by the solar sector.
As seen in Figure 1, the electricity generation mix continues to experience a rapid rate of change with renewables as the fastest-growing source of electricity generation through 2050. This is because continuing declines in the capital costs for solar and wind are further supported by federal tax credits and higher state-level renewable targets . While not as evident in the figure above, solar energy grew by leaps and bounds in the past decade with installations growing sixfold in just 9 years . The reason: no other electricity generation technologies have been able to keep up with solar’s pace of technology advancement and resulting cost reduction over the past decade. Multi-silicon solar module prices dropped from over $2 per watt in 2010 to just over $0.20 per watt in Q3 2019 – a 90% price reduction . With technological advancements and more availability for solar panel placement, the sector has experienced incredible growth and will continue to be the sector that propels the renewable energy industry to new heights.
COVID-19 Impacts on Solar
Unfortunately, like many industries worldwide, the global pandemic has halted the progress of solar capacity in the renewable energy industry. In mid-January, the EIA forecasted an addition of 13.5 GW to the total solar capacity in the U.S. for 2020, almost doubling the previous single year high in 2016 of 8 GW . Projects in Texas, California, Florida, and South Carolina made up more than half of utility-scale solar capacity additions while residential and commercial renewable projects were also set to see new highs from more affordable, efficient solar photovoltaic (PV) and rooftop systems hitting the market. With unstable domestic containment of the pandemic, the United States has ramped up preventative measures resulting in many new construction projects being put on hold indefinitely. Among them are many renewable energy developments including those for the solar sector. At the beginning of July, the solar company Sunrun Inc. announced it would be acquiring its competitor Vivant Solar Inc. because “the merger will allow them to cut operating costs and leverage complementary sales strategies” . This all-stock transaction is valued at $3.2 billion enterprise value, or $1.6 billion excluding Vivant Solar’s debt. Although 2020 was thought to be a booming year for renewable energy, the recent outbreak is infecting the energy industry with uncertain skepticism . Before the spread of COVID-19, analysts had projected that global PV demand would grow 14%–22% from 2019 to 2020. Analysts have revised 2020 global projections over the past month to be 13%–19% below previous predictions, which would keep global demand relatively flat in 2020 . The Q2 solar deployment losses are equivalent to powering 288,000 homes and $3.2 billion in economic investment .
While the projections seem grim, the outlook remains positive. The stalled growth of the industry is just that – the projects have simply been put on hold. Even though this pandemic will undoubtedly influence the market and the short term clean energy goals of many countries, demand for renewable energy is still up. As is evident in Figure 2, most analysts see demand rebounding in 2021 to approximately the same values as they had previously predicted. This is significantly above 2019 installations as clean energy goals are still in place. The pandemic has not changed the inevitability that more companies, countries, and consumers support renewable energy as a primary source of new energy generation in the future. Developers in the utility and commercial markets have recognized this fact and are now locking prices in for future projects at historically low interest rates . Despite the uncertainty of when new construction in the renewable industry will resume, renewable projects should pick up again and continue to grow in the coming years. Whether the delays will last a few weeks or months, the demand for renewables will still drive an increasing solar market.
There is an immediate downside to delayed projects as a result of the global pandemic. Delays may cause some renewable projects not to reach completion until 2021, which threatens the eligibility for the Investment Tax Credit (ITC) for solar and Production Tax Credit (PTC) for wind . Even though these federal tax credits were not extended in the latest $2 trillion aid package, this may change in the coming months as solar and wind advocates lobby for an extension. According to Wood Mackenzie Power & Renewables, the U.S. was predicted to install nearly 20 GW of renewable energy, making up an annual growth rate of 47% this year alone . Although it’s safe to say that these predictions are now off-track, COVID-19 shouldn’t influence the trajectory of renewable energy in the long term.
Projected Solar Recovery and Growth
As discussed previously, the global pandemic has only delayed the inevitable. While the world may experience a priority shift putting clean energy on the backburner to ensure global economic stability, there will still be a desire to transition towards renewable energy down the road. Some methods for selling solar energy have been retooled for the post-COVID consumer. Customers were often marketed solar options from kiosks and stands at retail stores like Home Depot or by door-to-door sales, but companies have had to pivot to more sales online and via phone . These methods have worked better for larger companies while smaller players that are used to building consumer trust in-person have struggled in the virtual space . The delay in many solar projects will also force a large uptick in future projects to meet clean energy goals that have already been set. Regaining the momentum for development of these projects will propel the sector to new heights.
While the coronavirus has made accurate projections on the growth of the solar sector nearly impossible, one fact remains clear. The world will continue to strive towards clean energy, and solar will lead the way. With many contracts on hold, solar installation companies are eager to get back to work and continue the upward trajectory set in the past decade. Although delayed, the solar sector will still overtake wind to be the leading renewable energy power generating sector within the next 20 years.
The coronavirus pandemic has not been kind to most industries worldwide, and the renewable sector is no different. Hardest hit in the sector was solar power generation which was experiencing tremendous growth prior to global economies shutting down from society sheltering in place. Through June of 2020, the industry employed about 188,000 workers, rather than the 302,000 originally forecasted – a 38% decline . The solar industry has also eliminated 72,000 jobs in the first half of the year according to the Solar Energy Industries Association, with 75% of those lost jobs in the residential solar sector . Such losses negate five years of solar industry growth, pushing the workforce back to a level not seen since 2014. All 50 states show solar job reductions, with 36 states suffering job losses above 30%. Seven states and Washington DC, including large solar states like New York and New Jersey, have seen solar job declines exceed 60% . This makes solar one of the industries hit hardest by the global pandemic and subsequent economic recession.
Despite difficult times, the stance solar has taken during this downturn is a noble one. Instead of pushing ahead when there are no real opportunities, the industry is taking a step back to put projects on pause until life begins to return to normal. The oil industry should adopt this mentality. Instead of attempting to continue projects and produce oil at historically low prices and negative cash flow, simply put them on hold until higher prices inevitably return. The situation and outcome between these two industries is not a direct apples to apples comparison, but the thought process is. Instead of pushing forward when the path is blocked, take a moment to pause and reevaluate all options before moving forward. Additionally, the solar industry is focusing on supporting hospitals and other essential businesses in a time when residential projects have seen a huge dip in installations. They are modernizing their business model to support organizations that are pushing current society forward and putting residential projects on hold as individuals are reigning in their spending. Although the incredible growth of the solar industry has been temporarily stalled, solar advancements will continue to propel the renewable sector to new heights in the post-pandemic world.